SEC approves changes to reserves reporting requirements

Nick SnowWashington Editor

WASHINGTON, DC, Dec. 30 -- The US Securities and Exchange Commission unanimously approved changes to its reporting requirements for oil and gas producers. The adjustments reflect technological improvements over the last 25 years, SEC said Dec. 29.

SEC said the renewed disclosure requirements include provisions that permit use of technologies to determine proved reserves if those technologies have been demonstrated empirically to lead to reliable conclusions about reserves volumes. They also allow producers to disclose probable and possible reserves, which contrasts to earlier rules that limited disclosures to proved reserves.

"These updated rules consider the significant changes that have taken place in the oil and gas industry since the adoption of the original reporting requirements more than 25 years ago," said John W. White, director of the SEC's corporate finance division.

The revised disclosure requirements also require producers to report the independence and qualifications of entities that evaluate or audit reserves, file reports when a third party is used to prepare estimates or audit reserves, and report reserves using an average price based on the prior 12 months instead of yearend prices, according to SEC.

The use of an average price for oil and gas will lead to more reliable comparisons of reserves among producers and mitigate distortion of estimates that can result from using a single pricing date, SEC said. The full text of the changes will be posted on the commission's web site as soon as possible, the commission said.

"In the more than a quarter century since the SEC last reviewed its rules in this area, there have been significant changes in technology that have increasingly limited the usefulness of current disclosures to the market and investors. These updates to the SEC rules will help ensure more meaningful and comprehensive disclosure of information that, even though it does not appear on a company's balance sheet, is of significance to investors in making informed investment decisions," said SEC Chairman Christopher Cox.